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Debt crisis looms: Pakistan may pause repayments without IMF funding

IMF team sets to assess Pakistan's $3bn SBA on November 2
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March 14, 2023 (MLN): Pakistan will likely be forced to pause its debt repayments if it cannot secure funding from the IMF, the lender of the last resort, quickly, according to a recent report issued by Bank of America. 

Pakistan needs to repay about $3 billion of debt by June, and while $4 billion is expected to be rolled over, the country's current economic situation is precarious.

The report stated that default is a real possibility for Pakistan, which has been indicated by its current rating assigned by Fitch Ratings.

While the probability of default is high, it is still less than 50%, according to Krisjanis Krustins, a director at Fitch based in Hong Kong.

Pakistan has implemented a series of policy measures to try to address its economic challenges, but the country still requires additional financial assistance.

Finance Secretary Hamed Yaqoob Sheikh said on Thursday that an agreement with the IMF was likely in the next few days, though Pakistan has missed such timelines in the past.

One potential source of relief for Pakistan is China, which is the country's largest creditor. The report noted that China holds the key to providing relief in the near term, given its close ties with Pakistan.

There is growing hope that China will come on board to provide a backstop to its long-time ally, which would be a significant development in the region's economic landscape.

The situation in Pakistan is complex, and there are no easy solutions.

However, the report from Bank of America highlights the urgent need for Pakistan to secure additional funding to avoid defaulting on its debt.

With the IMF agreement still up in the air and China's involvement uncertain, it remains to be seen how Pakistan will navigate these challenges in the coming months.

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Posted on: 2023-03-14T10:58:41+05:00